6 smart money moves to make as an adult

Written By The Good Housekeeping Cookery Team | 19 May 2017

Time to give yourself financial freedom

Make time to check your money is well deployed and working as hard as it should be. It means you’ll be better positioned in the long run – and do less financial firefighting. Follow our six-step plan to get you on track for real financial freedom...

1. Top up your savings

How’s your rainy day fund? As a ballpark figure, you need the equivalent of at least three months’ salary in an instant access savings account as an emergency fund. Anything less than this and you’re leaving yourself vulnerable to the winds of fortune.

Yet, worryingly, one in four UK families has less than £95 in savings at any one time. How much you can afford to set aside needs to be carefully calculated. Look at your outgoings and income to assess where you can trim back. It’s a question of priorities, and ensuring you have a financial buffer shouldn’t be an optional extra. If necessary, then start small – saving just £20 a week adds up to £1,040 over a year.

For other long-term savings goals, the key is to put your money in the right place. With interest rates remaining stubbornly low, the returns on cash ISAs or current accounts are pitiful. But even a relatively modest, low-risk investment, such as a stocks and shares ISA, should easily outstrip inflation rates. Remember, though, that you will need to be prepared to put the money away for at least 10 years.

Find a regulated investment advisor at Unbiased and research the different investment and savings options available. Online investment services, such as Nutmeg and Hargreaves Landsdown, also have plenty of jargon-free information.

With increasingly stretched NHS resources, private health insurance has a growing role to play in supplementing what’s available for free. If you want more choice over your care, such as reduced waiting times and specialist referrals, and can afford it, then it’s definitely worth considering. A family premium (two adults in their 40s and two children under 10) can vary from £700 to £1,650 per year.

Shop around, check what’s covered and what’s not, and be honest about your health conditions. If the policy requires you to pay for treatment and claim it back, think about whether you would be able to afford that. Use comparison
sites, such as Comparethemarket.com and Moneysupermarket.com, to see what’s on offer, and check (and recheck) what’s covered before you sign up.

If you’re employed, health insurance may be part of your company’s benefits package. And remember that you may also be covered on your partner’s workplace insurance scheme.

3. ​Check your life cover

If you have dependents who rely on your income, life cover is one way of protecting them financially. There are different types of life insurance, each with pros and cons, so look closely at which one suits best. Level term life insurance, for example, pays out a set amount regardless of when you die within a fixed term.

Bear in mind that, with some deals, you may have to pay a large commission over the lifetime of the policy.

It’s also worth looking at Family Income Benefit, which pays out a regular income rather than a lump sum to your dependents, and can be more cost effective.

We all know we need to save more as the State Pension isn’t enough to live on and because the age at which we are eligible keeps being pushed back. As life expectancy increases, we will also be spending longer in retirement than previous generations… Need we go on?

Use the Money Advice Service Pension Calculator to find your likely retirement income and when you’ll reach state pension age.

If you are short of money, look for ways to supplement your income. Consider putting off your State Pension to enable you to get more money when you retire. Download the form here.

Check you’ve received all the National Insurance credits you are entitled to – some, such as carer’s credits, need to be applied for.

Join your workplace pension.

Over 50 and thinking about releasing some of the money in your scheme? Visit pensionwise.gov.uk or call 0800 138 3944 for advice.

Under new rules, you are allowed to pass your personal or company pension on to a family member when you die, so don’t forget to nominate your beneficiary.

Speak to a specialist pensions adviser who is regulated by the Financial Conduct Authority.

5. ​Update your will

Once you’ve written a will it’s easy to tick it off the list and forget about it. But you should review it every five years, and certainly after any major changes in your life. These may include separation, divorce, getting married (which cancels any will you made before), moving house or if an executor named in your will dies. For small changes, you can add a codicil, but for major changes you should make a new will.

Remember the law doesn’t automatically recognise cohabitants as having the same rights as husbands, wives and civil partners. Unless you own your property jointly, don’t assume it will go to your partner.

If you need to make a new will, find out if you can get it done free rather than paying a solicitor. If you have legal cover with your home or car insurance, it may include a will service.

Anyone aged over 55 can have a will drafted or updated by a solicitor for nothing as part of Free Wills Month in March and October. Will Aid, which runs every November, provides access to around 900 solicitors to write simple wills. While the service is free under these schemes, the hope is that you will make a donation or bequest.

6. ​Pay off what you owe

Nobody likes the idea of owing money, much less paying interest on it. But borrowing is a fact of daily life – whether it’s the tail end of the mortgage, a credit card with the balance from your holiday or a store card. Paying these off, reducing or eliminating interest on any debt should be your top priority.

Consider switching to a 0% balance transfer deal credit card (some deals last for up to 40 months) and setting up a direct debit to pay off the balance. Make sure you don’t use the card for new purchases.

Some store cards have punishing interest rates of more than 25%. Make use of any discounts on offer, but try to pay off the balance every month.

If you can’t immediately pay off your store card, as with credit card debt, switch the debt to a 0% balance transfer credit card.